What were the two consequences when farmers could not pay back their bank loans?

As a result local sheriffs seized many farms and some farmers who couldn’t pay their debts were put in prison. These conditions led to the first major armed rebellion in the post-Revolutionary United States.

Why is the farmer not able to repay the loans?

Farmers say they are unable to repay loans in the background of rising fertilizer prices, and an unstable market for farm produce due to the lockdown. Not even the large farmers will be able to repay the loans if the government demands them,” said Jayashree Gurannanavar, Karnataka Rajya Raitha Sangha leader.

What is farm loan waiver scheme?

What is a Farm Loan Waiver? When there is a poor monsoon or natural calamity, farmers may be unable to repay loans. The rural distress in such situations often prompts States or the Centre to offer relief — reduction or complete waiver of loans.

Is loan waiver to farmers justified?

Extent of waivers Farm loans are justified “on social welfare grounds with the Government citing urban-rural divide in growth, social unrest and farmers’ suicides as the justifications for the national ADWDRS [Agricultural Debt Waiver and Debt Relief Scheme, 2008] programme,” the report said.

What happened to the farmers who borrowed money?

Farmers who had borrowed money to expand during the boom couldn’t pay their debts. As farms became less valuable, land prices fell, too, and farms were often worth less than their owners owed to the bank. Farmers across the country lost their farms as banks foreclosed on mortgages.

How did owing money to a bank prevent farmers from getting the highest price possible for their crops?

It was difficult for farmers to get out of debt because they had to plant a lot of crops and so the price of their crops went down and this made them in debt. They had to take loans and sometimes the loans made them pay large interest rates which also put them in debt.

Is loan waiver good or bad?

Loan waivers can also negatively impact the credit flow because it creates distortions in the credit market since repeated waivers encourage default among the farmers. It also increases the NPAs (Non-Performing Assets) of banks.

Can loans be waived off under government grants?

This was challenged in the Supreme Court. Nudged by the apex court, the government devised a scheme to waive compound interest for loans below Rs 2 crore, irrespective of whether the borrower availed of the moratorium fully, partially or not at all.

How does loan waiver affect banks?

Against the Interests of Depositors: Banks receive money from the depositors and lend money to borrowers under different contracts and agreements. Thus, the loss to the bank, due to loan waivers, is directly or indirectly against the interests of the depositors.

How will farm loan waivers impact the Indian economy?

If poll-bound states—including Gujarat, Karnataka, Rajasthan and Madhya Pradesh— too announce farm debt waivers and extend it to one-third of farm loans in their respective states, then the aggregate amount of farm debt waivers before the 2019 elections would balloon to Rs2 trillion, or 1.3\% of India’s GDP.